The proposed measure of minimum resting times or transaction to order ratios is intended to decrease the speed at which markets operate and the cost in monitoring the information they generate.

In what follows, our analysis suggests market speed has gone far beyond the point where it is beneficial to the point where it is harmful. This is for the simple reason that the private benefits of speed come from relative speed (i.e. being faster than others) while market quality is determined by absolute speed levels. Beyond some level of absolute speed which has long been exceeded markets are harmed by speed, even though the private incentives for relative speed remain unchanged regardless of the overall level of speed in the market.

The proposed measure is one way of dealing with market speed. While the intent of the measure is in the right direction, we argue the measure itself is ineffective and may cause more harm than good. We develop an alternative proposal which we believe achieves the same goals much more effectively.

This review has been commissioned as part of the UK Government’s Foresight Project, The Future of Computer Trading in Financial Markets. The views expressed do not represent the policy of any Government or organisation.

You are cordially invited to submit your research papers for presentation at the 2ndVietnam International Conference in Finance (VICIF-2015) that will take place on the 4th-5th of June 2015 in Ho Chi Minh City, a high-octane city of commerce and culture of Vietnam.